Thursday, Sep 13, 2007
Two and counting!
FT: Bank of England to bail out Northern Rock
After Victoria, now the turn of Northern Rock... but wasn't it different here in the UK? BoE can bail out banks but it is unlikely will slash rates to ease the credit conditions. Too many implications for inflation, currency etc. Please do not forget that this credit crunch is due to the ongoing right-pricing of risk. This has nothing to do where you set the "risk-free" BoE base rate, which s got to do purely with inflation.
Posted by confused76 @ 10:53 PM (1421 views) Add Comment
33 Comments
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1. inbreda said...
Just seen this announced on newsnight
Word is getting out, and the effects are going to be bad. What people have been saying on this board for a long time is actually starting to happen.
I think the snowball effect means that things are going to speed up - I think even the cynics on this board may be surprised at the pace of the decline.
2. Orwell said...
Well what will Mr. Smith of exemplary Economic redoubt say?!!!
3. confused76 said...
Read this masterpiece of gloominess
in the Times tomorrow
Prepare for bad news: house prices are going to drop
Summer’s financial crunch will hurt homeowners
http://www.timesonline.co.uk/tol/comment/columnists/anatole_kaletsky/article2448868.ece
4. enuii said...
what's the betting that the Bradford & Bingley is in the race to the bottom as well, tomorrow is going to be an interesting day.
5. David 90210 said...
House prices always go up though etc
6. david20040_0 said...
Dudes, calm down.
We have seen this all before in 2005. Then the BoE cut rates and the boom took off again.
You really think the Government can afford a HPC right now.
If there is one will that mean we will finally get the Tories back in :)
7. David 20040_0 said...
You lot are a bunch of halfwits with brains like potoatoes
8. confused76 said...
David,
what r u talking about? It is supply and demand... what s the BoE rate s got to do with it? :))
9. David 20040_0 said...
Confused76
Your not only confused but a bit of a berk!! Be quiet
10. whiteknight said...
Its to do with the pricing of risk, but the limit low of the framework is the bank of englands base rate.
everybody knew the score. obviously.
11. Mr Crabs said...
David,
I think it's time for you to buy a house.
12. wiltshire said...
Have to agree Inbreda, and I've said it myself. Others have used the phrase 'a perfect storm' on here many times and that is what it feels like, so many factors are all coming to a head at the same time (house prices FINALLY over-reaching themselves, inflation rising to the point where the government can't hide it - and no-one is falling for it now anyway (after all we're facing the reality of the situation daily!), interest rates rising, credit tightening, etc etc etc) and finally the genie is out of the bottle as far as the media is concerned and they are reporting daily (headline stories too) about things we have discussed here for years. Having watched how high the house of cards has been built and having seen how wobbly it has got each and every month it really does feel now as if it will finally topple and when it does it won't be a few cards at a time, the whole thing is going to go very very quickly.
You know one reason why I think it'll happen quickly? Because most people (though arguably stupid) aren't so stupid that they don't realise the game is up and most people have known for a long time too. Sure they hide it cos we all want to think we can get away with stuff for ever but if you're 1000s in debt you know at the back of your mind what's going to happen, even as you spend some more. There's a few thousand in London and the South East living like kings, there's a few celebrities also living like kings and giving the celebrity obsessed masses something to aspire to but you can only paper over the cracks for so long. We've spent the lot and then spent it again and then spent some more. Everyone knows you cannot go on living beyond your means indefinitely. They/we all hoped the party wouldn't end but the slow songs have started.......
13. Orwell said...
I think our PM Unelect, will try desparately to hold things up and do a runner for the polls in November...
14. planning4acrash said...
David, Mr Brown doesn't need to go to the poles till 2011. He can easily shoulder a "globally induced" housing crash.
15. Orwell said...
No no no no no....
Mr. Smith of exemplary Economic Redoubt tells us there is no Sub Prime problem....
And I was King Canute in a different life.............
16. Alan said...
Thanks C76
If London couldn't stop this credit crunch (or even protect its position), then perhaps we don't deserve the top spot in International Finance.
Reputation means a lot in financial circles... and the big banks, investment trusts and hedge funds have lost a big chunk, recently.
17. Orwell said...
I think it will be Scabbey before its B&B mind.........
18. wiltshire said...
Sorry David but I do not agree that we have seen all this before in 2005. Do you read any of the news items on this site other than the ones you post yourself???
Irrespective of whether you do or not, do you not see a pattern emerging? We all know what has been happening in the USA in the past few years - low interest rates, cheap credit, lax lending, consumer debt, HPI, hedge funds making enormous sums etc. Now see how things have turned out in the USA and in the week that the first UK sub-prime lender has gone into administration you claim we've seen all this before.
I wish I could view your posts as positively as some here do but they just annoy me, they're nonsense.
19. Mr Crabs said...
David,
I think it's time for you to buy a house now.
20. Alan said...
Liberal Democrat Treasury spokesman Vince Cable said: "This is a very serious development indeed and it was entirely predictable since Northern Rock is one of those banks which has been aggressively increasing its market share by offering mortgages at multiples of income well in excess of prudent levels"
21. C'mon Correction said...
I think we're all forgetting that David is a moron. If he offered a counter argument backed up by sound logic then it'd worth commenting on, but he can't and he gets too much attention on this site.
I think that's why he keeps coming back to this blog. I think there is a word for it - people who go on blogs and dis-agree blindly just to annoy other people?
It would be like myself going on a UFO blog-site saying they're all wrong to believe and not giving sound evidence why aliens don't exist.... AND I think they is A LOT more evidence that there are signs of a house price crash in the UK coming soon than an UFO invasion !!!!!!!!!!!!!!!!!!!! but of course David would disagree, cos the Daily Express "says so" or something !!
22. Runandbang said...
There was an interesting comment made on the news, the presenter read out some emails and one of them was from a so called "employee" of Northern who said that over the past 3 months they have had very little work with regards to mortgages. You have to be some what skeptical with this email comment given that it not verified.. but if it is the case a few things spring to mind... The main credit issue only started about a month and a bit ago, so what does that mean for the state of the housing market... 3 months... I guess the most immediate danger for NR is a run ....
23. whiteknight said...
Oh dear. Oh dear. Oh dear.
Goodbye GBP its been nice knowing you.
24. lvmreader said...
Key phrases
In Defence of Currency
The race to the bottom
Credit Contagion
Contagion Models
Liquidity Squeeze
Short Squeeze
Synthetic CDO unwind
Inverted Yield Curves
Currency Collapse
25. Koala Bear said...
Another day, another article about the financial mess that the UK economy/housing market is in. It gives me so much satisfaction to read exactly what I've been saying would happen reported in the mainstream media.
26. confused76 said...
David,
read this in the FT: IT HAS ALWAYS BEEN A MATTER OF WHEN, NOT IF
http://www.ft.com/cms/s/5500ce88-61f0-11dc-bdf6-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F5500ce88-61f0-11dc-bdf6-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F05576104-620d-11dc-bdf6-0000779fd2ac.html
It has always been a matter of when, not if. August data from the Royal Institute of Chartered Surveyors showed that more estate agents reported a decline in UK house prices than reported a rise, the first negative balance in 22 months. New buyer inquiries declined at the fastest pace in three years. The survey, based on interviews with estate agents, is at odds with more upbeat data compiled by mortgage lenders, and August is a slow month at the best of times. Even so, Rics is watched closely, having flagged accurately the end of the 1980s property boom.
With the US housing market in decline, there are few reasons why the same should not happen in the UK. Price rises have been steeper, interest rates have jumped five times in the past year – whereas in the US mortgages tend to be fixed – and consumers are just as indebted.
27. voiceofreason said...
The BBC piece on NR says :
"...It added: "Such repurchase facilities would include securities that have prime residential mortgage assets as underlying collateral...."
I do hope that the BoE insists on only high LTV mortgagees as collateral.
28. The Baldman said...
David
The government and BOE have limited powers when it comes to halting a global credit crunch. They have to some degree been able to manipulate the economy in a benign global economy but it is now pay back time as global conditions worsen.
29. dbnazz1 said...
Well David, you are certainly sticking by your guns, I will give you that.
You are starting to sound like the captain of the Titanic refusing to leave the doomed ship.
30. Scott said...
The Captain of the titanic came from my home town. They offered to statue him in Stoke but we refused.
31. An Bearin Bui said...
NR's share price is down 20% today - hurrah!! Now let's just hope that the emergency lending from the BoE was a one-off and they don't get anymore bail-outs... I want to see this "bank" go to the wall. Their business model was always dodgy and now it no longer works as no-one wants to touch securitised debt derivatives with a barge-pole so they should be hung out to dry like any other failing business. It's the glorious free market, isn't it??
"We don't need no water, let the mortgage-lender burn, burn, mortgage-lender, BURN"
32. Bored@work said...
@ C'mon Correction:
The word you are looking for is "Troll"
33. C'mon Correction said...
Thanks Bored - Yes David is a Blog Troll !!
I wouldn't mind if he had a brain and used it to play devil adovcate with sound ideas explaining why prices will rise forever and ever. I personally won't be reading anymore of his blogs/articles and will skip past regardless.